The Stoxx Europe 600 Banks Index surged by more than 60% in 2025. Benjamin Goy, Head of European Financial Research at Deutsche Bank, said, “European banks are well-capitalized, with most—if not all—holding significant capital surpluses.” The key issue currently facing bank management is how to deploy this excess capital. Share buybacks and dividend payments are common tools with low execution risk. However, Goy expects the focus to shift toward external growth in 2026, particularly M&A activity. “This is precisely what the sector has been missing for the past decade. Management confidence is returning, investor support is growing, and announced deals typically boost earnings per share—which explains why the acquirer’s stock price often rises as a result. We expect such activity to increase further.”